October Housing Starts fell 10.6% to 529k units (annualized). Some have blamed the fall on uncertainty over the 8K first time home buyers stimulus while others point to a consumer who is unemployed and over budget.
Market action, as I mentioned earlier has been a two way street. With earning season (stocks) in full swing, volatility has really picked up in both equities and bonds. Mortgage backs have been the worst performer on the day with spreads to treasuries widening as sellers continue to lean on the market. Currently, the 10 year note is off 7/32’s (yield 3.45%), MBS off 9/32’s, and stocks off only 1 point on the big board. Technically, we are trading a lower lows, lower highs type of pattern. By nature it is bearish and suggests higher interest rates, worsening Austin mortgage pricing present the higher probability. We will want to pay close attention the 10 year yield as it approaches 3.48% - 3.50%. That level is key support and “should” provide a near term bottom, followed by a rebound. If that level does not hold, MBS could feel another ½ point of pain. Play defense as the trend is not your friend!
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